How Can I Improve My Credit Scores To Qualify For Mortgage

This Article Is About Advice On How Can I Improve My Credit Scores To Qualify For Mortgage

Many consumers ask how can I improve my credit scores to qualify for mortgage? There a minimum credit score requirements to qualify for mortgages. Each loan program has its own credit score requirements. In this article, we will discuss and cover ways of improving your credit to qualify for a mortgage.

Credit Score Requirements To Qualify For A Mortgage

Credit score requirements for the following mortgage loan programs. HUD requires a minimum of 580 FICO credit score to qualify for a 3.5% down payment home purchase FHA Loans. Borrowers can qualify for FHA Loans with credit scores between 500 and 579 with a 10% down payment. VA does not have minimum credit score requirements. Lenders who require a minimum of 580 to 640 FICO to qualify on both VA home purchase and refinance loans are requiring minimum credit scores because of their own lender overlays. USDA requires a minimum of 580 credit scores to qualify. Minimum Credit Scores for FHA 203k Loans is 620 FICO. Minimum Credit Scores required for Jumbo Mortgages is 500 with our NON-QM Jumbo Loan Programs at Gustan Cho Associates. The minimum Credit Scores required for 5 to 10 Fannie Mae Financed Properties is 720. Gustan Cho Associates has non-QM and alternative mortgage loan programs that are non-traditional.

Credit scores determine whether borrowers qualify for a certain mortgage loan program. For example, to qualify for a 3.5% down payment FHA Home Loan, borrowers need a minimum credit score of 580. A 580 will limit debt to income ratio cap to 43%. Borrowers with high debt-to-income ratios need to improve their credit scores to 620 credit score. This is because the debt-to-income cap increases to 56.9% if credit scores exceed 620 FICO.

Effects Of Credit Scores In Qualifying For Mortgages

Low credit scores mean higher mortgage interest rates. This means it costs borrowers more money when it comes time for them to secure a mortgage. Lenders penalize borrowers with low credit scores. This is because lower credit scores mean higher risk borrowers. Many times, it is worthwhile to wait until the applicant have repaired their credit scores before applying for a mortgage. Borrowers should always work with mortgage brokers and/or bankers who they feel comfortable with and someone who will act in their best interest. A mortgage broker should give borrowers various options that would be most beneficial for them. I, for example, advise my clients that they can qualify for a lower interest rate if they can get their scores up if that is the case. Ways on how I can improve my credit scores to qualify for a mortgage may just be by paying down their credit cards. Gustan Cho Associates Mortgage Group assists folks in assisting them to boost their credit scores. Borrowers who just got their credit scores plummet due to a recent bankruptcy or foreclosure should start repairing and reestablishing their credit as soon as possible.

How To Improve Credit Scores To Qualify For Home Loans

The great news is that borrowers can improve credit scores. There are ways how to improve credit scores to qualify for home loans. We will cover tips and quick fixes on how to improve credit scores so borrowers can qualify for a mortgage. Other reasons to take advantage of How To Improve Credit Scores are so borrowers can get the best mortgage rates. Improving and repairing credit is like planting grass seeds and watching grass grow. It takes time and patience. However, it can get done. It is like losing weight. If consumers do not work at it diligently, it will not happen. But if people work at it religiously, they will lose weight over time. Same with credit repair. There are ways How To Improve Credit Scores. People can improve their credit scores if they discipline themselves by making all minimum monthly payments on time.

Credit Scoring Models And How Can I Improve My Credit Scores To Qualify For Mortgage

Credit scoring models are complex and often vary among creditors and for different types of credit. If one-factor changes, one’s credit score may change. Improvements in credit scores usually are dependent upon one factor or another taken into the credit scoring model formula by each credit bureau. Only the credit bureau can explain what might improve a consumer’s credit score under the particular model used.

Nevertheless, scoring models generally evaluate the following types of information in your credit report:

Here are some factors on how I can improve my credit scores to qualify for mortgage:

• Paying bills on time
• Overall payment history of consumers is an important factor in the credit scoring model
• Late payments will negatively impact borrower’s credit scores
• Collections accounts, charge offs, and late payments will drop consumer credit scores
• However, scores will improve as the derogatory credit tradeline ages
• Large balances on revolving accounts will negatively impact consumer scores
• Higher balances will hurt consumers
• Paying down revolving accounts will greatly boost scores
• The longevity of credit history with a creditor shows strength and stability
• Lack of credit will hurt consumers
• Multiple inquiries are not good:
  • Hurt consumers
  • Lenders view multiple inquiries as not favorable
• The amount, age, and type of accounts consumers have determines their scores

Borrowers with any questions, please contact us at Gustan Cho Associates.

There is no obligation or cost involved. Even if consumers just filed bankruptcy and are not ready to buy a home until a later date, contact us. Let’s work together in rebuilding your credit.  Consumers with low credit scores and who want to prepare to qualify for a mortgage click APPLY NOW FOR PRE-APPROVAL or call us at 800-900-8569 or text for a faster response. We are available 7 days a week. You can email us at gcho@gustancho.com.

Late Payments and Impact on Credit Scores

Consumers should religiously pay all of the minimum credit payments on time. One late payment will not only drop credit scores by 50 or more points but will be reflected on the credit report for seven years. Consumers will always have that late payment history on their credit reports. The payment history record will comprise 35% of the credit score calculation. A late payment is not the end of the world. But it will drastically drop credit scores initially. As time passes, the late payment will have less and less impact on credit scores. However, it does take time. It’s like recovering from a major hangover.

igh Credit Card Balances Will Lower Credit Scores

Credit scores will fluctuate from month to month. Fluctuations depend on how much credit balance consumers have on their credit card balance. The lower the credit balance, the higher the credit scores. For consumers with a $1,000 credit limit, credit card, and a balance are $990. Credit scores will be low. Paying off the balance or having at least a 10% credit card balance of credit limit will optimize credit scores. The available credit on credit cards is a huge factor in positively optimizing credit scores.

Re-Establishing Credit After Bankruptcy and Foreclosure

For those with a recent bankruptcy or foreclosure, chances are that credit scores have plummeted. That is okay. The sudden drop in credit scores will not be permanent. Even nothing is done to re-establish credit after bankruptcy or foreclosure. Credit scores will naturally improve over time. However, those who want to improve their credit and be able to get a mortgage loan as soon as possible need to re-establish credit as soon as humanly possible. The best way how to improve credit scores to qualify for a mortgage after bankruptcy and/or a housing event is by getting three secured credit cards.

How To Rebuild Credit After Bankruptcy For Mortgage Approval

Most people assume that they will only have to deal with cash due to bankruptcy or foreclosure, and re-establishing credit is out of the question. This is not correct. The easiest and fastest way to improve credit scores and re-establishing credit after bankruptcy and foreclosure is to get 3 to 5 secured credit cards with at least a $500 credit limit. Use these cards regularly. Never ever miss a payment. Pay all of the credit card minimum monthly payments on time.

This BLOG On How Can I Improve My Credit Scores To Qualify For Mortgage was updated on February 22nd, 2021